The cost of equity for the firm must take the cost of preferred stock (if any has been issued) that the firm has outstanding into account.

Question

Quizplus · Accepted Answer

The cost of equity for the firm must take into account all forms of equity capital, including preferred stock, that the firm has issued. Preferred stockholders are entitled to receive predetermined dividend payments before common shareholders, and therefore their cost of capital will also affect the cost of equity for the firm.

The Cost of Equity for the Firm Must Take the Cost